Rupee spurts by 18 paise on weak dollar, PM reform push

The rupee on Tuesday rebounded by 18 paise to close at 75.36 against the US dollar after Prime Minister Narendra Modi asserted that the country will get back its economic growth.

Forex traders said positive domestic equities, weak American dollar and foreign fund inflows also supported investor sentiments.

The Prime Minister’s pledge to undertake more structural reforms to change the course of the country enthused investors, they added.

The rupee opened lower at 75.57 at the interbank foreign exchange market and moved between 75.62 and 75.36 during the day trade.

The currency finally settled at 75.36 against the US dollar, registering a rise of 18 paise over its previous close of 75.54.

A day after Moody's downgraded India's credit rating to a notch above junk status on growth concerns, Modi said the country will get back its economic growth and said reforms undertaken during the lockdown will help the economy in the long-run.

Speaking at CII's Annual Session, he said the Indian industry, has started talking about 'getting growth back'.

"I will go beyond getting growth back to say, Yes! We will definitely get our growth back," he said expressing confidence in Indian farmers, small businesses, and entrepreneurs for helping achieve that.

On the equities front, the 30-share BSE Sensex rallied 522 points to settle at 33,825.53 led by gains in banking stocks, extending gains for the fifth straight session. The NSE Nifty jumped 152.95 points or 1.56 per cent to 9,979.10.

Foreign institutional investors were net buyers in the capital market, as they bought equity shares worth Rs 1,575.46 crore on Monday, according to provisional exchange data.

Brent crude futures rose 2.14 per cent to USD 39.14 per barrel.

The dollar index, which gauges the greenback's strength against a basket of six currencies, fell by 0.27 per cent to 97.57.

"The rupee opened lower on Tuesday given the Moody’s rating downgrade. But the RBI supplied dollar both in the onshore market through direct forex intervention and in the offshore market through public sector banks," said Devarsh Vakil, Head Advisory, HDFC Securities.

Vakil further said that the rupee has hovered in a tight band between 75.3 and 75.9 rupees per dollar since last one month. "We believe dollar rupee is likely to appreciate and trade below 75 mark this week," he noted.

Sugandha Sachdeva, VP-Metals, Energy & Currency Research, Religare Broking, stated that a sharp upswing in global as well as domestic equities and gradual unlocking of the domestic economy fuelled significant upside in the Indian rupee.

"Markets are now pinning their hopes on global recovery and shrugging off concerns about the deepening rift between the US and China and the damaging effect of the virus on the global economy. Decline in greenback is further aiding appreciation in the rupee," Sachdeva said.

Meanwhile, in India, the death toll due to COVID-19 rose to 5,598 and the number of the number of infections rose to 1,98,706, according to the health ministry.

The number of cases around the world linked to the disease has crossed 62.88 lakh and the death toll has topped 3.75 lakh.

The Financial Benchmark India Private Ltd (FBIL) set the reference rate for the rupee/dollar at 75.4792 and for rupee/euro at 84.0904. The reference rate for rupee/British pound was fixed at 93.5308 and for rupee/100 Japanese yen at 70.16.